President Bush: “A future of hope and opportunity requires that all our citizens have affordable and available health care. For all Americans, private health insurance is the best way to meet their needs. But many Americans cannot afford a health insurance policy.” 

DMI says: “The State of the Union’s health care proposals share three common themes: (1) they shift the cost and risk of health care from employers and the public sector on to individuals and families; (2) they threaten the existing health benefits middle-class Americans get through their jobs; and (3) they pressure ordinary Americans to second-guess their doctors’ advice and to cut back on needed care. Together, these ‘market-based’ proposals favor the wealthy and healthy to the detriment of the sick, poor, and anyone who suffers a medical emergency.”    

Please click the links below for DMI's analysis of each of the President's proposals:

Standard Deduction for Health Insurance

“Affordable Choices Initiative”

Health Savings Accounts

Association Health Plans

Malpractice Liability Caps

Health Care

President Bush: “A future of hope and opportunity requires that all our citizens have affordable and available health care. For all Americans, private health insurance is the best way to meet their needs. But many Americans cannot afford a health insurance policy.”

DMI says: “The State of the Union’s health care proposals share three common themes: (1) they shift the cost and risk of health care from employers and the public sector on to individuals and families; (2) they threaten the existing health benefits middle-class Americans get through their jobs; and (3) they pressure ordinary Americans to second-guess their doctors’ advice and to cut back on needed care. Together, these ‘market-based’ proposals favor the wealthy and healthy to the detriment of the sick, poor, and anyone who suffers a medical emergency.”  

Standard Deduction for Health Insurance

President Bush: Health insurance should be tax deductible up to $7,500 for individuals and $15,000 for families, both for people who purchase health care on their own and for people who get insurance from their employers.

• “With this reform, more than 100 million men, women and children who are now covered by employer-provided insurance will benefit from lower tax bills. At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, my proposal would mean a substantial tax savings… And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health plan within their reach.”

DMI SAYS: “Despite the impressive sounding numbers, President Bush’s proposal offers tax benefits that are modest at best for the middle class, as part of a plan that will actually do little to make insurance more affordable for the low-income uninsured. What’s more, the President’s proposal would provide a dangerous incentive for employers to stop offering job-based health coverage entirely.”

• The President promotes this deduction as an incentive for the uninsured to purchase coverage, but the reason 1 in 7 Americans aren’t insured isn’t a lack of incentives. It’s the cost of health insurance -- which is simply out of reach for these Americans.
• What’s more, a tax deduction won’t help. A tax deduction is only useful if you earn enough to pay income taxes.  Many of the uninsured pay little or no income taxes to begin with.
• Instead, the tax break will act as an incentive for well-off and healthy people to leave traditional employer-sponsored plans and go off on their own. With a lower risk of illness, these healthy people may get cheaper coverage in the marketplace, but they leave behind a weakened insurance pool, raising the cost of coverage for older, sicker, and lower-income Americans.
• The tax breaks offer a disincentive to employers to provide coverage. This will harm middle-class Americans who will lose their employer-provided coverage and be stuck paying more out of pocket to maintain the quality of their coverage.
• The President’s proposal assumes that the quality of existing care is too high, leading people to use too much health care – but, as we explain in the section on Associated Health Plans, this is not what’s driving up costs.
• The skyrocketing costs of health care are attributable to a host of factors, from new technology, to inefficiencies in the system, and soaring HMO profits.
• The fact that people with insurance can see a doctor when they want is one of the few strengths of our current system, not a weakness.

Relevant Statistics:

• Number of children without insurance: 10 million
• According to the National Priorities Project, the U.S. could pay for a year of health care coverage for every American child three times over for roughly the same amount of money the nation has spent so far on the war in Iraq.
• Amount it would cost to provide the nation’s uninsured with health care for one year: half the annual cost of the Iraq war
• Number of Americans who currently get private health insurance through their employers: 175 million
• Estimated amount the U.S. would save each year on paperwork if it adopted single-payer health care: $161,000,000,000
• According the Commonwealth Fund, percentage of people in the U.S. of working age with moderate to middle incomes who went without health insurance for at least part of the year in 2005: 41, up from 28% in 2001

Affordable Choices Initiative

President Bush: “Affordable Choices” grants will direct federal funds away from public hospitals and to states that agree to help the poor get private insurance.

• “States that make basic private insurance available to all their citizens should receive Federal funds to help them provide this coverage to the poor and the sick. I have asked the Secretary of Health and Human Services to work with Congress to take existing federal funds and use them to create ‘affordable choices’ grants.”

DMI SAYS: “This initiative would redirect money from the nation’s already squeezed public health infrastructure to provide subsidies to the insurance industry.”

• The President emphasizes that eligible states must help their citizens buy private health insurance, in effect subsidizing the insurance industry rather than expanding efficient public programs like Medicaid.
• To take advantage of the federal funds, the President suggests that states would have to scale back consumer protection laws about what types of care insurance companies must cover, encouraging the growth of junk insurance policies that don’t cover needed medical care.
• Have you ever heard of an over-funded public hospital? The President boasts that his plan is revenue neutral, but this is only possible because it redirects funds from the nation’s existing public health infrastructure – the emergency rooms and community clinics that make up not only our health care safety net, but would also treat the sick and dying in the event of a terror attack.

Relevant Statistics:

• Amount the President’s plan would redirect away from the public health infrastructure over five years: $3.9 billion
• Increase in HMO profits during the first six months of 2005: 21.2 percent
• Approximate proportion of public hospitals belonging to the National Association of Public Hospitals that have operating margins too low to finance working capital or reinvest in maintaining their own infrastructure: 3 in 5
• Percentage of uncompensated care these hospitals provide: 25
• Percentage of funding for public hospitals that comes directly from the public sector: 69

Health Savings Accounts

President Bush: Health care should be consumer-driven, and expanding Health Savings Accounts will help to meet this goal.

• “There are many other ways that Congress can help. We need to expand Health Savings Accounts.”

DMI SAYS: “Health Savings Accounts (HSAs) do nothing to address the fundamental problems of our enormously expensive and inefficient private health care system; HSAs just push risk and costs from businesses and the government on to America's squeezed middle class and exacerbate existing strains in the health care system.”

• Health Savings Accounts are predicated on the notion that people are spending too much on unneeded health care expenses and will spend less if they have to pay for it out of their own pockets.
• Presenting HSAs as a solution to the health crisis in America is disingenuous. The reason health care is so expensive isn’t because middle-class Americans are reveling in their gold-plated plans and spending unnecessarily.  The cost of health insurance is high because of many causes, including skyrocketing HMO profits and industry expenditures that have nothing to do with medical care.
• One such non-medical cost is the $60 billion to $82.5 billion on advertising and marketing to health care providers that the pharmaceutical industry is expected to shell out in 2007—approximately $200 to $280 per person in the United States.
• Other health care spending that did not go into providing care was the $277.6 billion in revenues at the top ten pharmaceutical companies in 2004, and the $11.4 billion profit HMOs made in 2004.
• The idea that individuals should control their own health care defies the central principle of insurance –to spread risk so that no insured individual is left with overwhelming costs or without access to needed care.
• President Bush expects busy middle-class Americans with no medical training to evaluate which tests and treatments are worthwhile. Doctors and other health care professionals—not patients trying desperately to save a buck—should decide what care is really warranted.
• By individualizing risk rather than spreading it among many people, HSAs will be attractive to healthier, wealthier people, who have less risk and more money to begin with, draining them from the insurance risk pool and leaving traditional insurance plans to cover the much steeper costs of providing coverage to higher-risk people.
• For the most part, HSAs do not make health care less expensive: instead they just move costs from employers, who may previously have paid for comprehensive health care benefits, to employees, who must now pay high health care deductibles out-of-pocket.
• Any health care savings that do arise from HSAs are the result of providing less health care — including skimping on needed care.
• HSAs are more effective as tax shelters for the very wealthy than opportunities for middle-class Americans to access quality health care.
• Contributions to the accounts are tax-deductible, and withdrawals from the accounts to pay for out-of-pocket medical costs are tax-free, providing an unprecedented opportunity for the very wealthy to shield money from taxation.
• Meanwhile, these tax breaks will not help the aspiring middle class (who comprise the bulk of the uninsured), because the majority pay little or no income tax. President Bush's plan makes the situation worse by requiring additional costs that have nothing to do with providing medical care — billions of dollars in fees the middle class would have to pay banks and money managers to manage their health savings accounts.

Relevant Statistics:

• Predicted net decrease in the number of uninsured people if the Administration’s health care proposals were put into place: 600,000 new uninsured, despite spending of more than $10 billion annually to subsidize HSAs
• Average deductible for an HSA-qualified family plan offered by employers in 2005: $4,070
• Approximate proportion of patients with deductibles over $1,000 who decide to forgo needed medical care because of the cost, according to one study: 2 in 5
• Approximate proportion with deductibles over $1,000 who reported difficulty paying medical bills or paying off medical debt: 1 in 2
• Average deductible for a preferred provider organization (PPO) plan: $679
• Likelihood that an individual with a high-deductible plan attached to an HSA paid more than 5 percent of their income in out-of-pocket medical expenses in 2005: two and a half times more likely than someone enrolled in a comprehensive insurance program
• Percentage more that a person in the 50-percent tax bracket saves in taxes per dollar that they deposit into an HSA than a person in the lower-income 15-percent tax bracket: 30 percent
• Cost, according to the Bush Administration, of the HSA proposals over the next ten years: $156 billion

Association Health Plans

President Bush: Association Health Plans will help small businesses to provide health coverage to their employees.

• “We need to…help small businesses through Association Health Plans.”

DMI SAYS: “Association Health Plans (AHPs) will harm the middle class — raising the cost of health care for small businesses and increasing the number of uninsured Americans — if they are exempt from state insurance laws that prohibit insurance companies from only insuring the healthiest consumers.”

• Exempting AHPs from state regulations increases average health care costs for small businesses and reduces the number of workers with health insurance. State laws prevent insurance plans from cherry-picking only the healthiest people for insurance coverage, allowing businesses with relatively healthy employees to join for less money, while charging higher rates to those with older and sicker workers. Such cherry-picking would destabilize the health care marketplace: state regulated health care plans would see their healthy workers siphoned off to the AHPs, leaving them with a disproportionate number of older and sicker employees who are more expensive to cover. As a result, an estimated 4 out of 5 small businesses would see their premiums increase under unregulated AHPs.
• Small businesses should be able to band together to get a better deal on health insurance without this harmful disaggregating of risk that will ultimately rebound to make health care less accessible and more expensive for many middle-class Americans and small businesses.

Relevant Statistics:

• Number of Americans who do not have health insurance: 46.6 million
• Percentage by which health care premiums have increased since President Bush took office: 73
• Percent of U.S. companies that offered their workers health insurance in 2005: 60, down from 69 percent in 2006.
• Among the 95 percent of U.S. businesses considered “small,” percent that offered health benefits in 2005: less than 50
• Change in the percentage of middle class families that have health insurance since President Bush took office: -5.76
• Ratio of growth in premiums for employer-sponsored health insurance to the growth of an average worker’s salary since 2000: 4  to 1
• Increase in employee contributions to company-provided health insurance since 2000: 143 percent
• Proportion of small business employees that would see their premiums increase if AHPs became common: 4 out of 5
• Average estimated increase in health care premiums for small employers with state-regulated coverage under AHP legislation: 23 percent

Malpractice Liability Caps

President Bush: We should work to decrease the cost of medical care by reducing medical errors and limiting liability for medical malpractice.

?         “We need to…reduce costs and medical errors with better information technology… and protect good doctors from junk lawsuits by passing medical liability reform.”

DMI SAYS: “We agree that reducing medical errors will decrease the cost of medical care. However, Bush’s proposal to limit liability for medical malpractice will only increase the frequency of medical errors because it eliminates a critical incentive for maintaining high quality patient care.”

• President Bush is right that part of the reason for the high cost of health care is the high number of medical errors.
• However, in the second part of his proposal, President Bush calls for capping medical malpractice liability. Capping malpractice liability limits the amount of money patients can receive when injured by their doctor’s negligence, and can effectively grant doctors immunity from the consequences of their malpractice. Capping liability for lawsuits is actually likely to increase the amount of medical errors that Bush agrees contribute to the cost of healthcare.
• The President’s own logic undercuts his call to implement these liability caps. In the absence of the “better information technology” that Bush agrees will “reduce medical costs and errors,” the threat of malpractice lawsuits is one of the primary means of controlling medical errors and their increased costs, as well the primary means of holding bad doctors accountable. Moreover, lawsuits are the only means of actually compensating the injured victims of medical malpractice.
• The President’s proposal would eliminate a critical incentive for maintaining high quality patient care. Most doctors are good doctors. Indeed, only a small group of “bad” doctors (5.9%) are responsible for the majority of all medical malpractice payments (57.8%). Because medical professional associations rarely discipline even the worst members of their profession, there are few other means available aside from lawsuits for holding them accountable.
• Instead of protecting “good” doctors from “junk” lawsuits, President Bush’s proposal mechanically protects all doctors whenever they make any kind of mistake. Just like good people do bad things, good doctors sometimes make mistakes and injure people who need to be compensated.
• Medical malpractice liability costs – including all malpractice payouts, settlements, and legal fees – only account for 1 percent of the nation’s health care expenditures. Clearly, this is not a significant contributor to rising health care costs. Indeed, even the Congressional Budget Office found that implementing Bush’s proposal would only reduce health care costs by at most half of one percent.
• One guaranteed way to reduce the cost of medical care is not to “reform” malpractice lawsuits, but to enact patient safety reforms that will reduce the current 44,000-98,000 annual deaths and 300,000 annual injuries resulting from preventable medical errors, as well as the 1.5 million medication errors that total $3.5 billion in unnecessary expenses each year. In short, the best way to get rid of the lawsuits President Bush complained about this evening is to modernize the practice of medicine and eliminate the avoidable medical errors that are the only reason these lawsuits exist.
• Bush’s liability caps would also fall disproportionately on women, people of color, children, the elderly, and working people.

Relevant Statistics:

?         Percentage of health care costs in the U.S. that can be directly tied to malpractice lawsuits, settlements, and payments: 1

?         Percent by which medical malpractice legislation championed by the President would decrease health insurance premiums and health care expenditures: .04 -.05

?         Number of hospital deaths each year that are attributable to preventable medical errors: 44,000 - 98,000

?         Number of hospital injuries each year that are attributable to preventable medical errors: 300,000

?         Total amount of annual medication errors that are preventable: 1.5 million

?         Amount that these medication errors cost each year: $3.5 billion

?         Amount that each preventable medication error adds to the cost of the inflicted individual’s hospital stay: $8,750

?         Percentage of doctors with 10 or more malpractice liability payments that received no disciplinary action from their state medical board: 67

 Return to Home Page: DMI on the 2007 State of the Union  

* All quotes are taken from the embargoed version of the State of the Union Address released by the White House before the speech.